Q&A: The pros and cons of debt relief
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Why is debt relief so contentious? Campaigners like Oxfam and Jubilee Research (which ran the “Drop the Debt” campaign) have long urged lenders to write off debt owed by poor countries. They argue that heavily indebted countries are forced to spend more on servicing their debt than feeding or educating their children. Multilateral lenders like the International Monetary Fund (IMF) and the World Bank are not against debt relief, but prefer to tie it to certain conditions. Western governments are also becoming more open to debt relief and have agreed to increase the amount they write off. However, there are concerns that debt relief might be seen as a perverse reward for countries that lack financial discipline. “What about the good guys?” says Charles Harvey, a fellow of the Institute of Development Studies in Sussex, UK. “Why should they keep paying if we let off the bad guys?” Why are the World Bank and the IMF more cautious about writing off debts? They are reluctant to cancel debt if the country in question does not have good governance or a credible government. Countries like Somalia and Liberia are heavily indebted but will not qualify for debt relief from the World Bank anytime soon. In addition, the World Bank and the IMF like to have a commitment from the country to re-allocate the money saved to areas such as healthcare and education. Often countries are also expected to initiate programmes of economic reform, such as cutting budget deficits. Source : news.bbc.co.uk |